BP Exploration Co (Libya) v Hunt (No 2) [1983]

Court: House of Lords

Facts: In 1957, Nelson Bunker Hunt secured an oil concession for the Sarir field in Libya. By 1960, Hunt entered into a contract with BP for the exploitation of the oil, involving the transfer of half the concession to BP, cash and oil contributions from BP to Hunt, and shared responsibilities for exploration and development. The contract included a profit-sharing arrangement. However, in 1971, political changes led to the Libyan government nationalizing BP’s half share, and Hunt's share was also expropriated two years later. BP claimed frustration of the contract and sought a just sum of money under the Law Reform (Frustrated Contracts) Act 1943, Section 1(3).

Issue: Whether the contract was frustrated and, if so, what constitutes a "just sum" under the Law Reform (Frustrated Contracts) Act 1943, Section 1(3)?

Held: The House of Lords upheld the lower courts' decisions, confirming that the contract was frustrated and affirming the calculation of a just sum.

Key Judicial Statements: Lord Roskill affirmed the principle of frustration and discussed the interpretation of Section 1(3) of the Law Reform (Frustrated Contracts) Act 1943.

💡 Leveluplaw: Highlights how the frustration doctrine operates in complex commercial agreements and the role of judicial discretion in calculating compensation under the Law Reform (Frustrated Contracts) Act 1943. It demonstrates the court's approach to ensuring fairness and preventing unjust enrichment when a contract is frustrated by unforeseen events.